The argument that Nvidia (NASDAQ:NVDA) stock’s expensive is very hard to sustain in the current environment. Over the past six months, it’s actually down around 3%, but the company has continued to deliver incredible operational data while its customers continue to plough money into artificial intelligence (AI) hardware.
With its FY26 now over, the forward price-to-earnings (P/E) ratio (for the coming 12 months) sits at just 22.6 times. That’s less than the Nasdaq and S&P 500 averages. And this is a company that sits at the heart of the AI revolution, continually proves its technologically far ahead of its peers, and has a whopping 58.8% operating margin.
Maybe earnings are about to go into reverse… after all, the P/E ratio can be incredibly misleading when companies are in a state of decline.
Well, that’s not the case here. Analysts point to an average annual earnings growth rate of 37.5% over the medium term. Personally, I think this points to growth at a very reasonable price. And that’s confirmed by the price-to-earnings-to-growth (PEG) ratio — P/E divided by forward growth rate — which sits at 0.6.
What’s more, applying this growth rate, in just three years, the company’s earnings would more than double (160% total growth). If the stock price stayed the same while earnings doubled, the P/E ratio would drop from 22.6 to about 8.7 times.
The long-term champion thesis
It is difficult to bet against Nvidia when you realise it’s not just selling chips, it’s building the operating system for the physical world. While competitors scramble to match their hardware, Nvidia’s technological moat is supported a full-stack ecosystem.
This creates a powerful lock-in effect where developers find it faster and cheaper to stay in the Nvidia ecosystem than to rebuild elsewhere.
What’s more, it’s going to be the company that benefits from other companies’ successes. What do I mean by that? Well, if Tesla successfully scales its robotaxis and Optimus robots, there will be a lot of Nvidia GPUs making that happen behind the scenes.
Financially, Nvidia’s also an absolute fortress. As of early 2026, it maintains a staggering net cash position of roughly $50bn. It can outspend peers on R&D and it can secure the future through strategic investments.
For instance, their recent multi-billion-dollar moves into the UK start-up ecosystem and massive stakes in companies like OpenAI (rumoured at $20bn) ensure it owns a piece of the very companies that buy their chips.
I also wouldn’t be surprised to see it dominate in the quantum era. It has enough cash to buy all the independent US-listed quantum start ups.
Risks? Well, there will be some concern about its customers developing their own chips. Alphabet already does this, but it also buy tons of Nvidia GPUs. It’s something to watch.
However, in this vast AI market, it’s hard to see a world where demand for Nvidia chips isn’t huge. With that in mind, I certainly believe it’s a stock worth considering.
